Market Upbeat Over Demand For Homes

Online, October 3, 2012 (Newswire.com) - The growing demand for apartments is a boost for property developers in Bangalore. The vacancy rates have decreased in the second quarter of this financial year due to improvement in sales of projects nearing completion. There has been no slackening in the demand for home loans as is evident from the number of enquiries received by various housing finance companies and banks. The prospects of further reduction in home loan lending rate have given a fillip to the overall market sentiment.

The city absorbed 4,290 residential units during the second quarter of this financial year as against 4,182 units in the first quarter, pushing the absorption rate up from 11 to 12 percent, according to a Jones Land LaSalle's periodical market update. Unsold stock in the second quarter dropped. The increase in demand was due to good sales in residential projects that are nearing completion and buyer sentiment shifting towards purchasing property rather than paying high rents, as well as the entry of investors from other Tier I and Tier II cities.

Supply pattern

An estimated 18 residential projects were launched across the city's sub-markets in the second quarter. Meanwhile, 15 residential projects comprising 2,336 units in various sub-markets were withdrawn from the active stock as they were completely sold out, a clear indication of the perceptible shift in buying trend.

The Hosur Road sub-market comprising Electronic City, Bannerghatta Road, Sarjapur Road and the southeastern parts of the Outer Ring Road, contributed 35 percent of the total new units available in the second quarter; while the Bellary Road sub-market accounted for 11 percent of the total. The secondary sub-market, which comprises Indiranagar, Koramangala, RT Nagar, Sanjay Nagar, CV Raman Nagar, Banashankari, BTM Layout, Marathahalli and parts of Sarjapur Road, contributed 10 percent of the total, and the Tumkur Road sub-market accounted for 17 percent.

Price Hike

Capital values appreciated across various sub-markets due to the increase in sales volumes and prices in sales volumes and prices in projects that are nearing completion. Rentals went up in the second quarter due to the influx of people and shortage of built units for immediate occupation. In fact, the rentals are likely to go up further during the year due to the expected improvement in IT/ITeS employment figures.

According to leading banks, there is no slackening in demand for home loans with the current average home loan size varying from Rs 30 lakhs upwards. Due to the entry of a few private banks who promote home loans aggressively, the market is likely to witness intense competition in the coming months too, say industry sources. At present, the size of the home loan market in Bangalore is said to be in the region of Rs 1,000-1,200 crores per month.

The intense competition has led to a few nationalised banks dominating in take over loans due to their relatively lower interest rates.

In the residential property segment, more end-users are active today than investors.

Demand Pattern

A Majority of the home loan requests are for apartments and villas, while a limited percentage consistute investments in developed plots and across the city. While residents constitute 80 percent of the home loan segment, NRI's share of the market is put at 20 percent. With the competition increasing, both housing financing companies and banks are expected to resort to innovative schemes to lure home loan borrowers as the pace to demand for investments in housing is catching up.

At the same time, there is no slackening in demand for high value loans a well. Many banks have reported a steady stream in demand for such loans for investments in high-end homes and luxury villas.

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